SMM Morning Comment For SHFE Base Metals On Mar 1

Copper

LME copper prices opened at $8458.5/mt and closed at $8478.5/mt overnight, a rise of 0.28%, with the low-end of $8448.5/mt and the high-end of $8520/mt. Trading volume was 17,000 lots, and open interest stood at 290,000 lots. SHFE 2404 copper opened at 69140 yuan/mt overnight and rose to 69140 yuan/mt after falling to 68860 yuan/mt, closing at 69050 yuan/mt, up 0.38%. Trading volume was 18,000 lots, and open interest stood at 149,000 lots. On the macro front, the U.S. core PCE price index in January recorded an annual rate of 2.8% (expected 2.8%, previous value 2.9%), the smallest increase since March 2021, supporting copper prices. However, the PCE monthly rate data reached a new high, and recent data shows that the cost of goods and services has increased, which may push the inflation trend to accelerate again. It is necessary to continue to pay attention to February data to verify the inflation speed. In terms of fundamentals, from the supply side, supplemented by imported copper, it remains relatively sufficient. In terms of consumption, as long-term orders are about to be delivered in March and copper prices surged again, downstream consumption remained unchanged. Overall, the supply and demand situation changed little, and the market is waiting for consumption to recover in March. In terms of price, on the whole, PCE data has driven copper prices higher, and copper prices are expected to remain high.

Aluminium

Overnight, the most-traded SHFE 2404 aluminium contract opened at 18,945 yuan/mt, with high and low at 19,010 yuan/mt and 18,930 yuan/mt before closing at 18,980 yuan/mt, up 55 yuan/mt or 0.29%. LME aluminium opened at $2,193.5/mt on Thursday, with its high and low at $2,230.5/mt and $2,186/mt respectively before closing at $2,225/mt, up $34/mt or 1.55%.

Summary: From a macro perspective, the latest increase in the US personal consumption expenditures (PCE) price index in January was in line with expectations, making it possible to cut interest rates in June. Fundamentally, the strike in Guinea has been suspended, and an aluminum smelter in Inner Mongolia has resumed power supply and production. In addition, there has been no increase in power in Yunnan and other regions. Aluminum smelters maintained stable production, and supply disturbances in China and overseas have basically eased. On the demand, short-term consumption is still expected to pick up, and spot transactions improved. According to the latest data from SMM, domestic social inventories of aluminium ingots and aluminium billets increased by 78,000 mt from last Thursday, but down by 24.6% YoY, which was the lowest level in the same period in the past six years. Aluminium billets inventory has basically showed signs of a downward trend. Overall, aluminium prices continue to move rangebound, and we need to pay attention to aluminium supply, recovery of consumption, and when aluminium ingot stocks will begin to drop.

Lead

Overnight, LME lead prices opened at US$2084.5/ton. LME lead stocks unexpectedly increased by more than 10,000 tons, recovering all the declines in the past week. Supressed by the US dollar, LME lead dropped to as low as US$2,056/ton, recovering slightly in late trading and finally closing at US$2,065/ton, a decrease of 1.03%.

The most active SHFE 2404 lead contract prices opened at 15950 yuan/mt last evening and finally closed at 15935 yuan/mt, down 0.06%. Open interest decreased 562 lots to 44567 lots.

Zinc

Last evening, LME zinc prices opened at $2411.5/mt and closed at $2423.5/mt with a low-end of $2404/mt and a high-end of $2439/mt, up $7.5/mt or 0.31%. The trading volume decreased to 9227 lots, and the open interest fell 3073 to 239,000 lots. LME zinc inventories increased 8050 mt to 276100 mt, a gain of 3.0%. Initial jobless claims in the United States for the week was higher than the expected value of 21 and the previous value of 20.2, recording 21.5. The labor market performance is weak, and interest rate cuts issues are still the focus of the market. Fed official Daly said that cutting interest rates too fast may lead to inflation backlash, and the macro sentiment is bearish.

Overnight, SHFE 2404 zinc contract opened at 20560 yuan/ton, and finally closed at 20585 yuan/ton, up 40 yuan/ton or 0.19%. Trading volume was reduced to 33879 lots, and the open interest increased by 1176 lots to 110,000 lots. Consumption is recovering. Smelters underwent losses and ore supply remained tight. Refined zinc supply can tighten. SHFE zinc will remain strong.

Tin

SHFE 2403 tin contract fluctuated downwards and stabilized at 216,030 yuan/mt before closing at 216,690 yuan/mt overnight, down 0.48%.

Yesterday, spot premiums and discounts in domestic spot market for various tin ingot brands were as below. Small brand tin ingots were offered at discounts of 500-1000 yuan/mt against SHFE 2403 tin contract, versus discounts of 500 yuan/mt to premiums of 300 yuan/mt for delivery brands, premiums of 400-700 yuan/mt for Yunxi brand, and discounts of 800-1,500 yuan/mt for imported brand tin ingots. Tin prices rose slightly in early trading yesterday, with downstream companies taking a wait-and-see attitude. Few deals were heard among traders.

Nickel

Overnight, the most-traded SHFE nickel contract opened at 134500 yuan/mt, and closed at 137710 yuan/mt, up 3420 yuan/mt. Trading volume increased by 98663 lots, and open interest increased by 14552 lots. From a macro perspective, although RKAB’s review speed has been accelerated, there are still a large number of mining quotas that have not yet been approved. From a fundamentals point of view, recent high nickel prices have dampened downstream buying appetite.